Business

Samsung heir probed over C&T and Cheil Industries merger, alleged fraud

Following Samsung Group Vice Chairman Lee Jae-yong’s historic apology, the de facto leader was recently summoned by prosecutors as part of a probe into the Samsung C&T and Cheil Industries merger dating back to 2015, as well as allegations of accounting fraud at Samsung Biologistics. Samsung Group’s heir was summoned for questioning by the Seoul Central District Prosecutors’ Office today, May 26, revealed the Korean media.

Samsung C&T and Cheil Industries – two Samsung Group subsidiaries – merged in 2015. Later in 2018, a number of current and former Samsung executives became a part of a lengthy investigation launched by the Financial Services Commission, alleging that the group had inflated Cheil Industries’ value ahead of the Samsung C&T merger. One example of this is the land value of South Korea’s largest theme park owned by Cheil Industries, called Everland, surging 370% percent in 2015 before the merger took place.

The merger helped Samsung’s heir rise to power

At that time, Lee was the largest shareholder of Cheil Industries and didn’t have a stake in Samsung C&T. The prosecutors suspect that the inflated value of Cheil before the merger was meant to favor Samsung’s heir, who is now being investigated for committing a breach of trust and violating the Financial Investment Services and Capital Markets Act.

The recent investigation was apparently triggered by other allegations of accounting irregularities at Samsung Biologistics. Samsung C&T is the largest shareholder of Biologistics with a stake of 43.44%, and Samsung Biologistics is suspected to have inflated its earnings to show high potential for Cheil Industries’ stake in the firm.

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